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▲ 0.20 (4.54%)
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338m
Research: Metals & Mining
On 2 October 2018, Rock Tech Lithium (RCK) announced the results of a preliminary economic assessment (PEA) at its flagship 100%-owned Georgia Lake lithium property in the Thunder Bay mining district of northwest Ontario. Compiled by international mining consultants, DMT, the highlights of the PEA were pre-production capex of C$65.3m, annual steady state EBITDA of C$64.2m, an 11-year mine life, a pre-tax IRR of 62.2%, a 3.5-year payback period and a post-tax NPV8 of C$210m.
Rock Tech Lithium |
Georgia Lake PEA
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Metals & mining |
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30 October 2018 |
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Rock Tech Lithium is a client of Edison Investment Research Limited |
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On 2 October 2018, Rock Tech Lithium (RCK) announced the results of a preliminary economic assessment (PEA) at its flagship 100%-owned Georgia Lake lithium property in the Thunder Bay mining district of northwest Ontario. Compiled by international mining consultants, DMT, the highlights of the PEA were pre-production capex of C$65.3m, annual steady state EBITDA of C$64.2m, an 11-year mine life, a pre-tax IRR of 62.2%, a 3.5-year payback period and a post-tax NPV8 of C$210m.
Small but high grade
Earlier this year, the company announced an upgraded mineral resource estimate of 13.29Mt at a grade of 1.09% lithium oxide (at a relatively conservative 0.65% cut-off grade), of which 49% is in the Measured and Indicated categories. RCK also believes that there is at least another 2.5–3.0Mt of lithium-bearing pegmatite mineralisation in the prospect, representing material defined in historical resource estimates, but yet to be drilled to NI 43-101 standards, plus new discoveries.
Future blue-sky upside potential
RCK took a conservative approach to the PEA, focusing on only a portion of the project, centred around the Nama Creek Main Zone, representing just 73% of the total mineral resource estimate. The production scenario envisaged producing 1.1Mt of 6.2% Li2O chemical grade spodumene concentrate over 11 years at a rate of 96,000tpa. However, it excluded additional Inferred resources on other areas of the property and, with new discoveries made seemingly every exploration season, there is therefore ample potential for future mine-life extension.
Premium infrastructure provides fast-track potential
The project is accessible year-round with highway access directly to an extensive network of logging roads on the property. Situated between the towns of Beardmore and Nipigon, and less than two hours from Thunder Bay International Airport, access to plentiful housing, amenities, equipment, supplies and skilled labour means no costly airstrips or camps need to be constructed. Power sources and grid access are also located in the immediate vicinity with a transcontinental rail station and deep-sea port less than 200km away, providing options for product delivery to end-users.
Valuation
Rock Tech Lithium’s enterprise value equates to just c 13% of its NPV8 (note that the NPV at our customary 10% discount rate is not yet available), while its resource multiple of c US$57/t LCE is at a discount to the mean of its peers.
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Historical financials
Source: Company sources |
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Disclaimer
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Disclaimer
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The UK government has raised remote gaming duty (RGD) from 15% to 21%. This was better than recent rumours of 25%, but 1% higher than market expectations of 20%. With implementation from October 2019 (rather than April), we raise our FY19e EBITDA by 5%. However, assuming no mitigation, we lower our FY20e EBITDA by £3m to £14.5m. While regulatory pressures are likely to remain a feature of the UK gaming sector, Stride is the number three online bingo-led operator and should benefit from its strong market position. The balance sheet is robust (£20m net cash) and, despite the increased taxes, we expect strong cash flow through synergies and strategic growth. The stock has fallen 58% this year and trades at depressed levels of 3.6x EV/EBITDA and 5.8x P/E for CY19e.
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